Abstract The periosteum, a highly specialized tissue microenvironment on the outer surface of bone, has a key role in ensuring the survival and self-renewal of a unique population of resident stem/progenitor cells that are responsible for appositional bone formation and fracture repair. Injuries that disrupt periosteal function are common, with 12-15 million fractures occurring yearly in the US that lead to 18 million doctor?s visits and result in 60 million workdays lost. Although most fractures heal successfully, due in large part to the innate regenerative capacity of the periosteum, healing is slow and ineffectual (nonunion) for more than 5% of patients, and failure to heal can be as high as 10% for fractures that occur in weight-bearing long bones that are crucial for mobility. Recalcitrant fractures are challenging to treat and current therapies produce unpredictable outcomes, leaving almost 600,000 patients each year with significant disability. Unpredictability in healing is compounded for procedures that aim to replace large areas of bone lost during trauma or tumor resection and require bone grafting; almost half of the 500,000 bone grafting surgeries performed each year fail over time, due in large part to the absence of live periosteal cells that orchestrate the new bone formation needed to successfully unite the graft to the host bone. Our published work identifies BMP2 as a potent physiological regulator of periosteal function. Mice lacking BMP2 expression in Prx1+ stem/progenitor cells exhibit severe defects in all known periosteal activities. In the absence of BMP2, bones fail to grow in width proportional to their growth in length, creating structural instability that results in spontaneous fracture; once fractured, the periosteum fails to initiate repair and cannot support bone graft incorporation. In addition, treatment with anabolic agents such as intermittent PTH or anti-sclerostin antibody fail to stimulate cortical bone formation in the absence of periosteal BMP2. As such, we hypothesize that the dynamic spatio/temporal expression pattern of Bmp2 within the periosteal niche constitutes an essential mechanism determining active versus quiescent states of the periosteum throughout postnatal life. We propose 3 aims to test this hypothesis. In Aim 1, we will validate the functional role of pathways identified in a recently completed periosteum RNAseq as downstream mediators of BMP2 signaling during appositional growth and fracture repair. In Aim 2, we will examine the requirement for BMP2 resident in the ECM of the periosteal niche versus BMP2 produced by periosteal cell during appositional bone growth. In Aim 3, we will determine if increasing endogenous BMP2 production by periosteal cells is beneficial for periosteal function. Completion of these studies will result in a more in depth understanding of the cellular and molecular mechanisms coordinated by BMP2 signaling in periosteal stem/progenitor cells, and should lead to the development of novel therapies for enhancing bone repair. Knowledge gained through this proposal also has the potential to increase the utility of anabolic agents targeted to the periosteum to prevent fractures.